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Flipping properties for profit? Don’t repeat it please.

Many years ago, perhaps up to 2012, many were still buying properties. More often than not, it’s solely for the purpose of flipping. Everyone thought earning money was easy. In the beginning it was really quite easy. All it needed was some courage to sign and take the risk. This was also encouraged by the Developer Interest Bearing Scheme (DIBS) where one pays next to nothing to secure a unit. As soon it was completed, one would sell for huge profits. My colleague’s friend sold her unit as soon as she got her keys to a condo in Penang for RM40,000 profit. It was unheard of!

It did not end there, the profit from the same project reached RM70,000 for those who sold a few months later and the property craze started in Penang in 2009. Queues for new projects stretched into hundreds of meters and some even paid RM1,000 for people to queue on behalf days before the actual launching. Prices spiralled up and everyone thought the party would never stop. In Penang, condos that were selling for RM229,000 became RM400,000 within 12 months of completion. I heard in KL, the number was even more higher for hotspots.

Then, Bank Negara Malaysia stopped the music. It made DIBS illegal. Everyone said that this will ‘kill’ the market. It did, sort of, together with a host of many other cooling measures including the most effective one in my opinion; Real Properties Gains Tax (RPGT). The market’s overall transaction numbers went down. So, what happened to those who bought at the tail end before DIBS was made illegal? Those who harboured the hopes of flipping? Their units have been completed and are now entering the market. If they are able to hold, they are still holding on. If they could not, the prices would go down and worst case scenario, even lower than what they paid for.

Renting it out within the first 12 months for a good price is virtually impossible and some may not want to lock down their units for 12 months at a low rent. The crazy good old days of flipping is over. Based on the current prices in the market which I seriously think is very high for that few hotspots, it will not be going up any higher. Nope, that new mall is not going to help you. Property prices are all about affordability, demand and supply. When majority could not afford, demand stops until the supply of affordable ones come back. OR if the supply in the hotspots remain too highly priced, people would be forced to buy in secondary areas of today. The affordability factor kicks in. What this meant is that we should stop thinking about flipping but start thinking about investing. Work harder in your job, invest with a longer time frame. Property investment will always be a good one when we think and act objectively. Happy investing.